#RiskRewardRatio is a key concept in investing and trading that measures the potential profit of a trade relative to its potential loss. It is calculated by dividing the amount of potential profit by the amount of potential loss. For example, if a trade has a target profit of $200 and a stop loss of $50, the risk-reward ratio is 4:1. A higher ratio indicates a more favorable trade, where potential rewards outweigh the risks. Traders use this ratio to assess whether a trade is worth taking based on their risk tolerance and investment goals, aiming for a favorable balance of risk and reward.